Alpha not rendered in movie in the Blender Game Engine
S O L V E D

The movie must have an alpha channel.
This is how to obtain an alpha channel in a movie by using Blender Video Editor:

Properties(Output section):

File Format - FFmpeg video

Container - Quicktime

Codec - QT rle/QT ANIMATION

Once you are done, you will see that next to BW and RGB you now have RGBA.
Your movie will be rendered with an alpha channel and in the game it will work perfectly.